There are a variety of different legal entities to choose from for your business.
One that many partners consider is the limited partnership (LP). This type of entity is similar to a general partnership, but it provides the partners with separate and limited status. The primary benefit is that a LP can provide protection from liability.
It common for a LP to be used by businesses that want to partner on a single project or for a limited period of time. For instance, real estate development projects commonly use LPs. The general and limited partners work together on a construction project with the limited partners investing money while the general partners supervise the daily operations of the business venture. A LP is appealing to investors who want limited liability in order for them to invest their money.
Below are a few of the other benefits offered by forming a LP:
- The LP contract is usually a privately signed document (not recorded or available to the public) and allows the parties and their agreement to remain anonymous
- As a separate legal entity, the LP can own real property
- Pass-through taxation benefits
- Employee benefits can be deducted
- Protection from lawsuits (If the entity is sued, the limited partners are protected or if the limited partners are sued, the LP’s assets can be protected).
- Forming a LP assists with establishing credibility for the business
There are a few disadvantages of forming a LP. The general partner has the obligation to manage the business and is liable for the debts of the LP. Also, to form a LP and keep it in good-standing, you must fill out necessary paperwork as well as comply with certain corporate formalities. Finally, the authority among the partners of a LP is divided which can cause issues.
In order to form a successful LP, you need a detailed LP agreement. Let us help you draft your entity’s contract and properly maintain it once it is formed.
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If you are interested in learning more about forming a limited partnership or any other type of legal entity, contact one of our seasoned attorneys to schedule your appointment. Our offices are located in Cocoa and Melbourne, Florida. We serve all residents and businesses in Brevard County and Central Florida.
The information on this blog or any blog is not intended as, and should not be taken as, legal advice.